German business confidence improved slightly in December, in line with analysts’ expectations, as firms expressed greater optimism about future business developments, although sentiment about current business conditions remained subdued to fall short of a forecast, data released on Wednesday by Munich-based CESifo Group showed.

The Ifo Business Climate index, or BCI, for industry and trade in Germany rose to 109.5 in October -- a 20-month high -- from 109.3 in November. The Ifo Expectations index rose to 107.4 in December, compared to 106.4 in the previous month and above a 106.5 consensus reading, while the Ifo Current Assessment index slipped to 111.6 in December from 112.2 in November and an expected 112.5 reading.

“The German economy is in a festive mood,” Hans-Werner Sinn, President of the Ifo Institute, said in a statement.

The business climate indicator in manufacturing continued to improve and hit 15.3, its highest level since spring 2011. However, manufacturers' assessment of the current situation too was scaled back, the data showed.

The BCI in wholesaling dropped to 9.5 in November from 11.8 registered in the previous month, while retailing fell slightly to 4.8, from 5.1 recorded in November. But retailers’ assessment of the current business situation rose to its highest value since spring of last year, Ifo said.

Expectations in construction rose to 1.3, reversing a contraction over the last five months.